“There were some signs of softening in the latest labour market data, with the unemployment rate ticking up to 3.8%. Employment and vacancies rose further, despite the -0.3% contraction in the economy during April, but growth rates appear to be levelling off. The UK’s incomplete jobs recovery may be running out of steam as the economic outlook darkens, with employment still languishing below pre-pandemic levels.
“We may be nearing a turning point for the labour market as creeping uncertainty results in employers taking their foot off the accelerator, but for now it remains extremely tight with a record 1.3 million vacancies, acute hiring challenges and big staffing gaps across a range of sectors. A key driver of this remains the UK’s large participation gap. Though the inactivity rate ticked lower again, it remains well above pre-pandemic levels.
“Meanwhile soaring inflation continues to erode living standards. In real terms, regular pay is falling at its fastest rate in over a decade, down by 2.2% y/y in April, with worse to come later in the year as inflation heads towards double digits.”